Yet again the Government’s policy on health insurance is revealed to be a costly, ideologically driven fiasco.
Research by Dr James Butler of the ANU’s National Centre for Epidemiology and Population Health reveals of the three major policy changes to stem the drift from private health cover, the cheapest policy was the one that worked best and other two have been expensive failures.
The percentage of people with private cover has slowly fallen since the introduction of Medicare. It was 50 per in June 1984 and had slid to just 30 per cent in June 1998. It only benefits were a capacity to queue-jump, but at a cost of having to fund the gap which public patients did not have to fund. It was not value for money so people left, particularly the young.
In 1997 the Government introduced a scheme providing for incentives for low income earners to take insurance and a “”fine” for high income earners not to take out insurance in the form of doubling their Medicare levy. The decline in numbers having insurance continued – the vast bulk of high-income earners already had insurance and low-income earners were still not persuaded of its value even with a subsidy. In 1998 the Government introduced the 30 per cent rebate scheme, under which it paid through the tax system 30 per cent of people’s insurance premiums. It was an astonishingly high subsidy as subsidies go, but the number insured only increased slightly at an enormous $1 billion cost to the Budget. In effect it subsidised those would had taken out insurance in any event – an encouragement reward for those who did not need to be encouraged.
Then in 1999 it announced the Lifetime Health Cover scheme. It was a jolly little euphemism for imposing extra costs for those over 30 who take out insurance for the first time. People who take out insurance earlier in their life and keep it would keep the low flat premium of community rating. This scheme would have cost nothing but for the other two schemes that meant the Government would have to shell out for every person who took up insurance. Even then it did not cost very much. Yet this was the most successful. In less than a year the take-up rate rose 15 percentage points. Nothing like a bit of fear to encourage the masses.
Of the schemes, only the Lifetime health Cover had any basis in economics. Before that, the funds were required to charge the same premium for a 28-year-old fitness fanatic as a 70-year-old smoking sedant suffering half a dozen expensive conditions and a likelihood of getting more.
Community rating has been the curse of private health insurance since Medicare began. The high-risk people charged a premium below economic sense stayed in, driving up costs and the low-risk charged a premium absurdly high to subsidise the high-risk left in their droves, compounding the problem.
It was obvious from Day 1. The trouble was the Government had the wrong aim. Its aim was the ideological one to increase private insurance, rather than the pragmatic one of improving health outcomes.
It makes market sense to abandon community rating altogether and increase the age penalty and add penalties for smokers and bonuses for those who pass fitness tests and the like. It makes general good sense to abandon the rebate and put the money directly into public (and even private) hospitals.
The rebate has been an appalling waste of money. The Government could have used the money to pick people randomly from the electoral roll and given them private cover and it would have got more people into private insurance. All it did was give richly undeserved money to people who always intended to keep their private cover.
We need less ideology and more pragmatism in government health policy.